The National Assembly has 30 days to acquiesce or ratify the veto.
President Guillermo Lasso totally vetoed the reformatory project to the Humanitarian Support Law. On July 21, 2022, Lasso published the veto stating that the 9-article bill addresses “extremely relevant” issues but does so “with absolute legislative technical lightness.”
The National Assembly has 30 days to accept the objections or ratify the original project.
The Humanitarian Support Law came into force on June 19, 2020, during the Covid-19 pandemic. It was presented as an “urgent economic” project. In other words, the Assembly had just 30 days to discuss it, approve it or deny it.
The first version of the project was approved on May 15, 2020, one day before the 30-day deadline expired. The then President Lenín Moreno presented a partial veto on June 9th, and the Assembly had 30 days to respond to the presidential observations, it did so in 10.
The assembly members debated the 32 modifications made by the President. They accepted 22 and rejected 10 changes proposed by Moreno.
The objective of this law was to solve economic problems derived from the health crisis caused by Covid-19.
Almost a year later, on June 16, 2022, the Assembly approved a reform to this law, partially repealing it.
This reform, among other things, annulled labor agreements —between employers and employees— to preserve job sources. The measure allowed both parties to agree on reductions in wages and working hours, to prevent companies, which did not have much economic activity, from going bankrupt.
This reform is the one that Lasso totally vetoed.
What did the reform to the Humanitarian Law made by the Assembly say?
The reform intended to partially repeal the Organic Law on Humanitarian Support to Combat the Health Crisis Derived from Covid-19, except for articles and provisions that would be added to specific legal bodies.
The reform repealed the law and sought to make changes to the following legal bodies:
- The Organic Monetary and Financial Code
- Organic Law of the Public Service
- Organic Law for Productive Promotion, Investment Attraction, Employment Generation, and Fiscal Stability and Balance
- Labor code
For the Organic and Financial Monetary Code, it proposed four changes.
The first was to incorporate a transitory provision to reschedule the payment of installments for obligations with entities of the national and non-financial financial system.
Specifically, it sought that these entities make agreements with their clients to reschedule, refinance and suspend the collection of unpaid installments acquired from March 16, 2020, to December 2021.
That same transitory, tried to prohibit that during the period of deferral the entities generate interest on arrears on the capital of the deferred values. In other words, interest must be forgiven.
In addition, rescheduled, refinanced or restructured loans would not be considered a risk in credit references.
The second change to the Organic and Financial Monetary Code was to incorporate a general provision for rescheduling the payment of insurance premiums.
It said that general, life, medical assistance and prepaid medicine insurance companies must reschedule the collection of monthly insurance fees, fees in policies of faithful compliance with the contract and proper use of the advance within the National Public Procurement System.
On this same point, it demanded that prepaid medicine plans not to be canceled by companies. Nor could they have an increase in the premiums charged a year after the entry into force of the reformatory law.
The third change to that code proposed the rescheduling of payment of fees for public banking obligations. In addition, it ordered the granting of credits for three years, prioritizing productive enterprises, specifically agricultural activities, crafts and public transport in all its forms.
The fourth and last change proposed to the Monetary Code was the cancellation of interest on arrears for current debtors of entities of the public or private financial system. The principal of debts would be refinanced at the discounted interest rate levels.
For the Organic Law of Public Service, the reform proposed two changes.
The first changes the terms under which doctors accrue the state scholarships they would have received for their postgraduate training. According to current regulations, doctors must work twice as many years as they took their studies in a center of the public health network (that is, of the Ministry, the IESS or complementary networks). For example, if the postgraduate course lasted 2 years, the doctor must work 4 years in a public center.
The reform proposed that doctors could choose to complete this period or only complete one year of compensation for each year of study.
The second change to this same law was to add a general provision that says that workers with health and administrative functions who worked in person from the start of the health crisis until July 2021 would receive an additional payment of 25%.
To the Organic Law for Productive Promotion, Investment Attraction, Employment Generation, and Stability and Fiscal Balance, the reform proposed to incorporate a transitory provision.
This would say that taxpayers who requested the Remittance Payment Facility and failed to comply with one or more quotas established with the Internal Revenue Service (SRI), such non-payment could not be considered as a default. In addition, it ordered the payment facility to allow the taxpayer to cover the total capital owed up until December 2023.
Finally, it proposed a provision for the Labor Code that said that all people who have been hired under an emergent contract and had exceeded the 90-day trial period at the entry into force of the reform, would be understood to be under an indefinite term contract.
The emerging contract allowed hiring without compensation for untimely dismissal for a period of up to two years, renewable for a similar period. All other labor rights remained in force.
For its part, the indefinite contract imposes high compensation for workers. The rigidity of the contractual labor system in Ecuador is pointed out by several analysts as one of the factors that prevent the reactivation of employment and the national economy.
This is what the Humanitarian Support Act of 2020 says (which is still in force after Lasso’s veto)
The law has seven main areas; these are the themes and the main points:
- Reduction of 10% in the total value of electricity service consumption in the months of March, April, May and June 2020 for the first two quintiles of the income level.
- The increase in prices of basic services such as water, electricity and internet is prohibited until March 2021.
- Services may not be suspended for non-payment until two months after the state of exception ends, which is in effect until at least August 15, 2020.
- During the emergency period and for up to 60 days afterward, tenants may not be evicted.
- Except if the property is in danger of destruction or if it is used for illegal activities.
- In order to benefit from this provision, tenants must have paid 20% of the outstanding values.
- In commercial premises, the tenant must demonstrate that their income has been affected by at least 30% in relation to what they had in February 2020.
- The entities of the national financial system must reach agreements with their clients to reschedule the collection of the monthly installments of their debts during the state of exception and up to 60 days later.
- In addition, they will give lines of credit to the productive sector.
- These are some benefits that Ecuadorian banks are offering during the crisis.
- There are discounts of up to 25% in the institutions of the National Education System and the Higher Education System for students whose legal representatives lost their job or income during the pandemic.
- During 2020, the attendance and evaluation of students cannot be suspended due to delays in the payment of pensions.
- Private higher education institutions can increase the percentage of scholarships for their students by up to 10% during the emergency.
- Insurers will not be able to terminate health insurance policies even if there are delays in payments.
- The insured will have up to 60 more days from the limit established in the contract to catch up with their contractual obligations.
- Those who could not pay their obligations with social security in March, April, May and June 2020, will be able to do so without interest, fines, or surcharges.
- There are payment facilities without interest, fines or surcharges for voluntary insurance affiliates who have not complied with their contributions in those same months.
- Layoffs due to force majeure will only be possible if the employer suspends all its economic activity.
- Due to duly justified events of force majeure, the employer may reduce the working day by up to 50%. The worker’s salary will be proportional to the hours worked and may not be less than 55% of the amount set before the reduction.
- The Ministry of Labor must be notified of any change in the working day.
- Members of the Ecuadorian Social Security Institute who were laid off in April, May, June and July 2020 can access unemployment insurance, if they meet the requirements established in article 23 of the law.